Tax expert: use the GST to impose ‘sugar tax’

Applying a higher GST rate to fizzy drinks and processed foods, and using the proceeds for fruit and vegetable subsidies, could improve Australia’s hefty obesity problem, according to a Victoria University tax expert.

Associate Professor Lidia Xynas said boosting the GST on sweetened sugary beverages and highly processed foods by a few percent from the current rate of 10 percent was a simple way to use taxes to fight obesity.

“Better health, better life – these are objectives that all Australians must strive for,” she said. “Obesity and overweight issues can be addressed positively using the GST as a vehicle for badly needed change.”

Recent data from the Mitchell Institute at Victoria University found that Australia’s national obesity rate has risen 27% over the past 10 years, with two-thirds of Australians now overweight or obese.

Dr Xynas said while she expected industry backlash to her proposal, it could encourage more manufacturers to find healthy alternatives to their products – a trend already gaining traction across many fast-food chains.

She also acknowledged that lower socio-economic consumers could be doubly disadvantaged by eventual price hikes to unhealthy products since these items are relatively cheap and accessible in disadvantaged areas compared to healthy food.

But the ‘hard paternalistic’ approach of imposing a higher GST could be countered with short-term ‘soft paternalistic’ measures, including subsidies for healthy food, school health campaigns, or stricter regulations on food advertising, she said.

Dr Xynas’ research considered how other tax options already trialed with mixed success overseas could fare in Australia.

Japan’s tax-the-person ‘Metabo law’ penalises employers with overweight staff and local governments with fat residents. It has resulted in only moderate success because it stigmatises individuals.

A Danish tax introduced in 2011 on unhealthy inputs such as saturated fats and sugar was cut short in 2013 due in part to unsustainable costs to small and medium-sized manufacturers.

“GST tax is not complicated compared to other taxation approaches. We’re already used to it, and administratively, it would not be difficult to impose,” she said.

Dr Xynas said three pillars that are internationally acknowledged to guide tax policy – ethics, law and economics – supported her GST approach to curbing Australia’s love of unhealthy food.

“Ethically, the government has a social obligation to address the obesity epidemic; legally, paternalistic practices are warranted to protect public health and safety as seat-belt laws and food labelling have proved; and economically, taxes are effective tools for the government to encourage behavior associated with improved health outcomes, such as excise taxes on cigarettes.”

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